The latest monetary policy of India was announced on August 5, 2026 by the Monetary Policy Committee of the Reserve Bank of India following its meeting from August 3 to 5, 2026. It kept the key policy repo rate unchanged at 5.25%.
Monetary policy is one of the major macroeconomic tools to maintain price stability along with sufficient liquidity in the economy to maintain sustained economic growth. The monetary policy is different from another macroeconomic tool known as fiscal policy. The monetary policy uses interest rates and money supply management for maintaining price stability and liquidity in the economy whereas the fiscal policy uses government spending and taxation to manage growth and equity in the economy, The monetary policy is managed by an independent central bank (like the Federal Reserve in the U.S. or the Reserve Bank in India) whereas the fiscal policy is managed by the national government (such as a country’s ministry of finance), The prime goal of monetary policy is inflation targeting and maintaining ample liquidity in the economy whereas fiscal policy aims at maintaining growth along with optimization of revenue and expenditure and realizing a sustainable balance between them.
Major highlights of the latest monetary policy
Growth and Inflation Projections
- Growth Forecast: Real GDP growth for the financial year 2026–27 was projected slightly higher at 6.7%.
- Inflation Outlook: Consumer Price Index (CPI) inflation for the year is projected at 5.0%, with expectations that inflation may experience temporary near-term pressure before moderating.
- Voting Pattern: The decision to maintain status quo and continue with a neutral stance was unanimous among all six MPC members.
Current Policy Rates
- Repo Rate: 5.25%
- Standing Deposit Facility (SDF) Rate: 5.00%
- Marginal Standing Facility (MSF) Rate: 5.50%
- Bank Rate: 5.50%
- Policy Stance: Neutral
Generally as a policy recipe it is desirable to have sync in monetary and fiscal policies to realise the targeted rate of growth and inflation. While monetary policy maintains the requisite liquidity in the economy for growth and keeps inflation under control, the fiscal policy maaintains development expenditure necessary for growth and the same time mobilises taxes for public revenue without adversely affecting aggregate consumption and investment. The goals of monetary and fiscal policies are difficult to realise simultaneously because if growth is pushed up, some inflation is bound to happen whereas if inflation has to be controlled, some amount of growth needs to be sacrificed. So a fine balance between monetary and fiscal policies, howsoever difficult is the real test of policy making.
